Falling house prices and rising rents have made it £120 a month cheaper to buy
a three-bedroom house than rent a similar property.

The average monthly cost of mortgage repayments, repairs and insurance is 16pc lower than the typical rent paid on an equivalent property, new research from Halifax shows.

The cost of buying a house has dropped by 34pc since 2008 because of falling property prices and mortgage rates. In contrast, the price of renting has risen 14pc since 2009.

The number of home purchases reached a five-year peak in 2012, but total sales were still 42pc lower than before the credit crisis.

Martin Ellis, housing economist at Halifax, said: “The sharp decline in home buying costs over the past few years, combined with a significant increase in rents, has greatly improved the financial attractiveness of buying a home. This shift has contributed to the increase in the numbers of house purchases.”

Buying a house is more affordable than renting across the UK. In London, homebuyers typically pay £193 a month less than the average renter, while in Yorkshire and the Humber there is virtually no difference, with average monthly rental costs £1 more than buying costs.

UK average monthly buying costs and rental payments*

Halifax’s calculation of the monthly cost associated with buying a home does not include the deposit, which averages £27,984 for first-time buyers.

Raising a deposit and uncertain job security are still the main obstacles to people buying their own home.

Renting has traditionally been cheaper than buying a home. In 2008 the average cost of buying a house was £217 a month more than the average rent in the UK.

Rising rents and cheap mortgage finance have boosted the appeal of investment properties, with separate figures released this week from the Council of Mortgage Lenders showing nearly 1.5m people hold buy-to-let mortgages.

Buy-to-let lending accounted for 11.5pc of all mortgage lending in 2012, compared to 9.8pc the previous year.